Dispute over a commercial housing sales contract

Huang Guangna v. Haikou Dongliang Industrial Co., Ltd. and Hainan Branch of Guangdong Yangjiang Jianan Group Co., Ltd. (dispute over a commercial housing sales contract)

[Judgement Abstract]
I. Since the registered owner of the property involved in the lawsuit has a legal stake in the result of the litigation, she is capable of being the third party to the lawsuit.
II. Since the majority shareholder of one party to the lawsuit obtained the ownership of the subject matter during the proceedings, but did not participate in the lawsuit as the third party, and filed the third-party action of vacation after the ruling of the case took effect, the presumption of the court that she was aware of the case and her failure to participate in the lawsuit was attributable to her own fault met the common sense and business practice. Thus, the third-party action of vacation filed by the said majority shareholder does not meet the prescribed conditions and the court shall rule that the said lawsuit is not accepted.
Supreme People's Court of People's Republic of China

Civil Ruling
No. 37 [2015], Final, Civil Division I, Supreme People's Court
Appellant (plaintiff in the first instance): Huang Guangna
Authorized agent: Xuan Liqin, female, ethnic Han, residing at Hainan University in Hainan Province. She is the citizen who is recommended by the Villagers' Committee of Changtai Village of Yunlong Town of Qiongshan District of Haikou City of Hainan Province where Huang Guangna resides.

SUMMARY
Huang Guangna, who refused to accept the civil ruling (No 2 [2015], First, Civil Division I, Higher People's Court of Hainan Province) on the dispute over a commercial housing sales contract which was filed by Huang Guangna against Haikou Dongliang Industrial Co., Ltd., Hainan Branch of Guangdong Yangjiang Jianan Group Co., Ltd. (hereinafter referred to as “Yangjiang Co., Ltd.”), filed an appeal to this court. This court formed a collegial panel according to the law to try the case and the trial has concluded.

BASIC FACTS
Huang Guangna filed a civil lawsuit to the Higher People's Court of Hainan Province on August 18, 2014 in which she claimed that: On October 31, 2012, Huang Guangna and Haikou Dongliang Industrial Co., Ltd. (hereinafter referred to as “Dongliang Co., Ltd.”) entered into a commercial housing sales contract, agreeing that Huang Guangna purchases Room 101 at the ground floor of Huanyuan Tower located at 97-1 Longkun South Rd, Haikou City, Hainan Province which is owned by Dongliang Co., Ltd. and has a total floor area of l320.6㎡at a price of CNY21250/㎡. After signing the contract, Dongliang Co., Ltd underwent the formalities for the commercial housing sales contract filing registration and the housing advance notice registration for Huang Guangna as agreed. Huang Guangna paid Dongliang Co., Ltd. the total housing purchase fund of CNY28,062,750, of which CNY1,6062,750 was paid by Huang Guangna herself and the remaining CNY12,000,000 was paid with the loan from Haikou branch of Pingan Bank Co., Ltd. (hereinafter referred to as “Pingan Bank”) which was obtained by mortgaging the aforementioned property. Huang Guangna has acquired the ownership of the property through conveyance and leased the property to others for use.
In 2012, a lawsuit over a project construction contract dispute between Yangjiang Co., Ltd. and Dongliang Co., Ltd. was filed to the Intermediate People's Court of Haikou City of Hainan Province and the subject matter of the case involved the property owned by Huang Guangna. Although Dongliang Co., Ltd had submitted the evidence to the court within the time limit of the first instance for providing evidence which proved that the house had been sold to Huang Guangna and all the legal elements for the property transaction had been met, after two instances of trial, neither Huang Guangna, the owner of the property nor Pingan Bank, the mortgagee had been aware of the existence of this lawsuit and neither the court of the first instance nor the court of the second instance had listed either of these two interested parties as the third party to participate in the lawsuit. What's worse was that, before examining the ownership of the property involved in the lawsuit, the court of the second instance awarded Yangjiang Co., Ltd. part of the ownership of the property in the civil ruling (No. 7 [2014], Final, XiongHuan, Higher People's Court of Hainan Province), which had seriously damaged the legal rights and interests of Huang Guangna, the owner of the property. In accordance with the provisions of Article 56 of the Civil Procedure Law of the People's Republic of China, Article 75 of the General Principles of the Civil Law of the People's Republic of China, Article 8 of the Contract Law of the People's Republic of China and Article 37 and Article 39 of the Property Law of the People's Republic of China, we hereby request for the vacation of the civil ruling (No.7 [2014], Final, Xionghuan, Higher People's Court of Hainan Province and the protection of Huang Guangna's legal rights and interests according to the law.
The Higher People's Court of Hainan Province held that in accordance with the provision of Article 56 of the Civil Procedure Law of the People's Republic of China, where a third person having or not having the right to make independent claims fails to participant in a lawsuit due to the reason not attributable to its own fault but there is evidence proving that the legally effective judgement, ruling or mediation agreement is entirely or partially erroneous and damages its civil rights and interests, the third party may, within six months from the day when it knows or should have known that its civil rights and interests have been damaged, file a lawsuit to the people's court issuing the judgement, ruling or mediation agreement for the vacation of the judgement, ruling or mediation agreement. This provision recognizes that a third party has the right to file a lawsuit for the vacation of an effective judgement, ruling or mediation agreement. Since the purpose of such lawsuit is to vacate an effective judgement, ruling or mediation agreement and its result will have a direct impact on the validity of the judgement, ruling or mediation agreement, the law imposes strict conditions on the person who may file a third-party action of vacation which include: the plaintiff who files a third-party action of vacation shall be a third party having or not having the right to make independent claims and and the plaintiff who files the third-party action of vacation shall be the third party to the original lawsuit. As for the civil lawsuit filed by Huang Guangna for the vacation of the civil ruling (No.7 [2014], Final, Qiong Huan, Higher People's Court of Hainan Province, since Yangjiang Co., Ltd., the plaintiff of the first instance, filed the lawsuit to the Intermediate People's Court of Haikou City of Hainan Province on September 18, 2012 and the court accepted and docketed the case on September 20, 2012, while it was on October 31, 2012 when Huang Guangna and Dongliang Co., Ltd. entered into the Commercial Housing Sales Contract, which means that the contract was signed more than one month later than the acceptance and docketing of the case. Therefore, when the original lawsuit was filed, Huang Guangna was not the third party to the original lawsuit and thus was not qualified for being the plaintiff of a third-party action of vacation. Secondly, one of the conditions for filing a third-party action of vacation is that the third party fails to participate in the lawsuit due to the reason not attributable to the fault of the third party. According to the industrial and commercial registration archive of Dongliang Co., Ltd., during the period from September 17, 2009 to January 27, 2014, Huang Guangna was a shareholder of Dongliang Co., Ltd who held 50% of the company's shares and by the time the lawsuit was filed, Huang Guangna still held 25% of the shares of Dongliang Co., Ltd. Since Dongliang Co., Ltd. submitted to the people's court the evidence proving the purchase of the property involved in the case during both the first and second instance of the civil lawsuit (No.7 [2014], Final, Qiong Huan, Higher People's Court of Hainan Province), Huang Guangna who held 50% of the company's shares should have known about the lawsuit. Since by the time the lawsuit was filed, Huang Guangna remained unable to provide any evidence to prove that she failed to participate in the lawsuit due to the reason no attributable to her own fault, the lawsuit filed by Huang Guangna does not meet the conditions for the acceptance and docketing of a third-party action of vacation. In conclusion, in accordance with the provisions of Article 56 and Article 123 of the Civil Procedure Law of the People's Republic of China, the court ruled that the lawsuit filed by Huang Guangna was not accepted.
Huang Guangna refused to accept the aforementioned ruling and filed an appeal to this Court on the ground that the fact found by the ruling was not clear and there were errors in the application of laws, requesting this court to vacate the ruling of the first instance and instruct the court of the first instance to try the case. Her main grounds were as follows: firstly, since the appellant was the owner of the property involved in the civil ruling (No.7 [2014], Final, Qiong Huan, Higher People's Court of Hainan Province), the ruling had damaged her legal rights and interests and she should be the third party to the lawsuit involved in the ruling. Secondly, since as a shareholder of Dongliang Co., Ltd., the appellant had the right to obtain the ownership of the property involved in the case according to the law, the ruling of the first instance which presumed that the appellant was aware of the aforementioned lawsuit involving Dongliang Co, Ltd. on the ground that the appellant was a shareholder of Dongliang Co., Ltd. was short of evidence. Hence, the lawsuit meets all the conditions for accepting a third-party action of vacation.

JUDGMENT'S REASONING
This Court holds that one of the issues of the lawsuit is that whether Huang Guangna is capable of being the third party to the lawsuit over the project construction contract which was filed by Yangjiang Co., Ltd. against Dongliang Co., Ltd. and the other issue is that whether failure of Huang Guangna to participate in the afore-mentioned lawsuit is attributable to her own fault.
As for the issue of whether Huang Guangna is capable of being the third party to the lawsuit over the project construction contract which was filed by Yangjiang Co., Ltd. against Dongliang Co., Ltd., in accordance with Article 56 of the Civil Procedure Law of the People's Republic of China, a third party in the civil action refers to a person which has an independent claim over the subject matter of the case or a person which has no such claim but has a legal stake in the result of the case. In the lawsuit over the project construction contract which was filed by Yangjiang Co., Ltd. against Dongliang Co., Ltd., the Intermediate People's Court of Haikou City of Hainan Province ruled, according to the civil ruling (No.7 [2014], Final, Qiong Huan, Higher People's Court of Hainan Province), that Dongliang Co., Ltd. transfered the ownership over the ground floor of Huayuan Tower with an area of 334 ㎡ which was involved in the case to Yangjinag Co., Ltd. and assist Yangjiang Co., Ltd. with undergoing the formalities on the property transfer. Since Huang Guangna has claimed in this case that Dongliang Co., Ltd. has purchased the ground floor of Huayuan Tower with an area of 1320㎡ and completed the formalities on the transfer, which means that the final ruling on the lawsuit filed by Jiangyang Co., Ltd. against Dongliang Co., Ltd. affected the right of Huang Guangna over the property involved in the case, therefore, she shall be listed as the third party to this case.
As for the issue of whether failure of Huang Guangna to participant in the aforementioned lawsuit was attributable to her own fault, according to the facts found in the civil ruling (No.7 [2014], Final, Qiong Huan, Higher People's Court of Hainan Province) and the claims of Huang Guangna in this case, during the proceeding of the lawsuit filed by Yangjiang Co., Ltd. against Dongliang Co., Ltd., Huang Guangna signed a property sales contract over the property involved in the case with Dongliang Co., Ltd. and was a shareholder of Dongliang Co., Ltd. who held 50% of the shares of the company at that time. Despite the fact that the result of the trial of the lawsuit filed by Yangjiang Co., Ltd against Dongliang Co., Ltd would certainly affect substantial right of Hunag Guangna, Huang Guangna failed to provide evidence to prove that before filing this action of vacation, she knew the difference between the result of the second instance and the conditions on the awareness of the entire process of the lawsuit. The presumption of the court of the first instance of this case which was made base on the status of Huang Guangna as a shareholder, the proportion of shares she held at the time and the relationship between the time when the property sales contract was signed and the time when the previous lawsuit was filed that Huang Guangna was aware of the previous lawsuit meets the common sense and the common practice of the decision making on the enterprise operation. The the ruling of the first instance that Huang Guangna should have been aware of the previous lawsuit, she failed to prove that her failure to participate in the proceeding of that case was attributable to her own fault, and this lawsuit filed by her does not meet the conditions for accepting a third-party action of vacation under Article 56 of the Civil Procedure Law of the People's Republic of China is correct.

JUDGMENT
In conclusion, the ruling of the first instance that Huang Guangna is not the third party to the case on which the civil ruling (No.7 [2014], Final, Qiong Huan, Higher People's Court of Hainan Province) was awarded is improper and this court hereby correct it. The reason for the failure of Huang Guangna, the appellant, to participate in the aforementioned case due to the reason attributable to her own fault cannot establish the lack of evidence. In accordance with the provisions of Article 56, Item 1 of Article 170 and Article 171 of the Civil Procedure Law of the People's Republic of China, a ruling is hereby issued as follows:
The appeal is dismissed and the original ruling is affirmed.
This ruling is the final ruling
Presiding Judge　　Yang Guoxiang
Acting Judge　　Zhang Na
Acting Judge　　Li Zhenhua
October 16, 2015
Clerk Liu Shan